Spain’s largest telecommunications operator, Telefónica S.A., has agreed to pay more than $85 million to settle a U.S. Justice Department investigation into a bribery scheme involving Venezuelan officials. This is not the first time Telefónica has faced bribery accusations in the U.S., as it was previously ordered to pay a $4.1 million penalty to the Securities and Exchange Commission in 2019 for providing tickets to the FIFA World Cup to foreign officials. The latest bribery scheme involved bribing Venezuelan officials to participate in an auction that allowed Telefónica to obtain U.S. dollars in exchange for Venezuelan bolivars. The subsidiary of Telefónica bought equipment at inflated prices from multinational suppliers, who then paid the bribes on its behalf to conceal the illegal scheme.
In return for the bribes, Telefónica received over $110 million in currency auctions, representing 65% of the total award to telecommunications companies that year. These auctions were essential for foreign companies to navigate strict foreign exchange controls in Venezuela, aimed at curbing capital flight and repatriating earnings in bolivars amidst triple-digit inflation. Principal Deputy Assistant Attorney General Nicole Argentieri condemned Telefónica’s actions, stating that the company chose to support a corrupt regime to overcome challenges in conducting legal business in Venezuela.
Court records reveal that a senior executive at Telefónica was informed in 2014 that the company would need to pay a “commission” on funds awarded in the currency auction. Proceeds from the scheme were used to fund a $500,000 vacation for one official in Saint Barthelemy, where an additional $605,000 was spent on luxury watches and jewelry for the official and their spouse. The subsidiary of Telefónica has been charged with conspiracy to violate the Foreign Corrupt Practices Act in U.S. federal court, but could avoid prosecution under an agreement with the Justice Department if it meets certain conditions.
Telefónica, operating in Venezuela under the Movistar brand for two decades, is one of 12 countries, mostly in Latin America, where the company has a presence. With 8 million wireless customers in Venezuela, Telefónica has yet to respond to requests for comment on the recent settlement with the Justice Department. The actions of Telefónica raise concerns about the ethical practices of multinational companies operating in countries with corrupt regimes, and the potential consequences for engaging in bribery schemes to maintain business operations in challenging environments. The repercussions of Telefónica’s bribery allegations highlight the need for greater oversight and accountability in the telecommunications industry to prevent similar violations in the future.
